To IPO or Not IPO: Twitter's debut

A Twitter tweet announcing the company's planned initial public offering (IPO) is pictured on a mobile telephone back-dropped by various twitter logos. - GERARD JULIEN/AFP/Getty Images

I was asked to blog about Twitter’s IPO. I did not want to blog about Twitter’s IPO.

Why did I want to avoid it?

Because I don’t want to give an IPO like this more press, more buzz, and possibly lead more people to invest in it just because it’s everywhere and we all use it and like it and ... well, yadda yadda.

But, then I reminded myself that all this IPO talk, particularly the talk about ‘cool’ tech companies, still gets regular folks asking the same question I just received from a dear young friend and owner of a local vintage boutique: "Should I buy Twitter?"

My short answer: Nope.

My long answer: Sure, everyone wants to hang out with the prom queen and shake hands with Miss Universe. Twitter stock is this season’s proverbial beauty queen -- albeit a beauty queen at the school for econo-wonks, a la Keynes’s take on investors not buying true value but instead, the most popular, talked-about stocks.

But note, after high school, how much influence does your class’s ‘Most Popular’ student still have on your life? Ten years later? How about twenty years later?

A popularity ‘buy’ is not a long-term buy. Beauty fades. And, to paraphrase my late, wise Dominican-mama Lupe, you may look good now, but in the end “ju get de’ face ju deserve.” It’s fun to hang out with a short-term winner but to invest in ‘buzz’ is to be blind to the machinations behind all that shiny, pretty money -- to be oblivious to potential rot, management issues, other players galloping quickly behind you or, huge shifts in a whole industry. The potential 'ugly' behind all that pretty.

Here’s the advice I gave my inquisitive friend, advice that applies to any-and-all who feel an itch to buy the latest IPO in the headlines:

Treat individual stock purchases like ‘lotto’ money. For example, once my local lotto gets above $100 million I’ll drop $2 or $4 to play, but just for fun. Stand-alone stock buys are entertainment as well as gambles. The risk is high, so don’t risk too much or at all. Remember, we hear about stock winners because winners make great stories. We rarely hear about all the losers who are much more plentiful in number. Drop no more than 3 percent to 5 percent of your long-term savings into risky ‘fun’ market plays.

Take advantage of tax-friendly retirement tools first, such as an IRA. Protecting gains from taxes adds nitrogen fuel to compound your earning potential.

Diversify, diversify, diversify. To sit on a stool with one leg is precarious, if not impossible. The more legs, probably the more stable you will be. Invest in various assets and classes of assets to spread around risk. For example, what you have in low-risk, more steady investments will prevent your whole portfolio from going kah-blooey when higher-risk investments lose and visa versa. Spread your financial ‘weight’ around.

Keep fees low. Consider this, every dollar you can save on taxes and fees keeps more money in your pocket and that’s more money that can grow long term. Index funds don’t carry management fees for the most part, and look for “no load” funds. Never pay retail.

I’d ask all those tempted by Twitter to remember how my friend asked me her question: Through Facebook. If you bought into that IPO, I take it that you like roller coasters.